This appeal has been filed by the taxpayer against the impugned order dated 18.07.2016 recorded by the learned CIR(Appeals), Faisalabad, wherein maintenance of assessment order under section 122(1) of the Income Tax Ordinance, 2001 has been challenged.
2. Succinctly facts of the case are that the taxpayer an individual derives income from embroidery/conversion of cloth on behalf of others, return filed for the year under appeal declaring income at Rs.439,211/- which were to be deemed assessment order under section 120(1) of the Income Tax Ordinance, 2001. Later on information regarding import of A machinery from Custom Import Data received which was not disclosed by the taxpayer. The taxation officer was issued show-cause notice under section 122(9) read with sections 122(5)/111(1)(b) of the Income Tax Ordinance, 2001. The taxpayer submitted written reply which was discarded by the taxation officer being unsatisfactory and amended the assessment under section 122(1) of the Income Tax Ordinance, 2001 as under:-- Income declared Rs. 439,211/- Addition under section 111(1)(b) ibidRs.7,372.798/- Total Income assessed Rs .7 ,812,009/- In appeal, the learned CIR (Appeals) upheld the treatment meted out by the taxation officer for the reasons and factors as embodied in the impugned order.
3. The learned counsel of the taxpayer contended that the taxpayer duly furnished documentary evidence regarding barter trade with Messrs Juckson Machinery Company Limited through Dr. S. Ainul Haque and proprietor of the Royal Weaving. Thus the question of investment does not arise.
He further added even specific performance of contract could be sought even on the basis of oral agreement is valid in the eye of law. In the instant case a barter contract was made between the two parties. Reference in this regard is given in a judgment of the Honourable Supreme Court of Pakistan reported as 2012 SCM R 1526; their Lordships have held that:-- "Remedy of specific performance of a contract being equitable in nature cannot be granted to enforce a transaction declared void by a statute."
He further Argued that the provisions of section 122(1) ibid can only the invoked when amending authority is in possession of "definite information" [as defined in section 122(8) ibid. obtained from audit or otherwise and on the basis of the same assessing officer is satisfied that there is escapement of assessm ent, under-assessment and assessment at too a low a rate; excessive relief of refund or mis classification of an amount under a head of income as provided in section 122(5) ibid. 4During arguments the learned counsel of the taxpayer stated that the amending authority issued two show-cause notices. He submitted that issuance of notice under section 122(9) was not enough to proceed further and the amending authority could not directly reach conclusion to make addition without fulfilling the requirements of law. No separate specific notice under section 111 of the Ordinance which precedent condition was issued. The superior court in such like situation had always disapproved the addition made by the departments. Show-cause notice is a foundational document, which is to comprehensively describe the case made out against the taxpayer by making reference to the evidence collected in support of the same. It is the narration of facts in the Show-Cause Notice along with the supportive evidence which determines the offence attracted in particular case. Reliance was placed in a case of the honourable Appellate Tribunal Inland Revenue, Lahore Bench, Lahore vide I.T.As. Nos.2135 to 2137/LB/2015 dated 19.02.2016; wherein it has been held that:-- "6. We have heard the rival parties, perused the available record as the case law replied upon by the learned AR and convinced that addition under section 111(1)(b) were made without issuing the specific notice and fulfilling the requirements of law. Therefore, the ratio decided in case law is applicable on all fours of the instant case. In its judgment decided vide I.T.A. No.1141/LB/2013, the Tribunal has held "the addition under section 111 is a subsequent stage on which the Assessing Officer would not directly reach before crossing the barrier and fulfilling the requirements for cancelling the deemed assessment order under section 120 in terms of section 122(5). The Assessing Officer, therefore, was required to first determined through audit that the deemed order is under assessed etc., in the interest of Revenue as provided under section 122(5A). Therefore, is no other method to modify or _re-assess a deemed assessment under the provision of Section 121 before exercising jurisdiction provided under sections 122(5) and 122(5A) on the basis and circumstances mentioned in these provisions separately". Assessee must have been given opportunity of being heard before making any addition issuing of combined notice under two different sections was fatal Taking guidance from the case cited supra we are of the considered opinion that the addition under section 111(1)(b) were made without fulfilling the legal requirements of law and has wrongly been maintained by the learned first appellate authority.
Consequently, the same are deleted and the appeal is allowed." </i> 5.We have given due consideration to the rival arguments of both the parties and also gone through the available record. In view of the above facts and judgment mentioned supra and after going through arguments advance by the learned AR the legal infirmities has been present in the assessm ent. It is well settled principle that "the intention of the assessee has to be considered in each case of sale or exchange and several principles have to be borne in mind and in deciding whether the transaction of sale and exchange amounts to adventure in the nature of trade or otherwise. Each individual transaction had to be considered after going into the full facts of the case", we hold that the impugned order as well as the order of the CIR (Appeals) are not sustainable in the eye of law. Hence, both the orders of the authorities below are annulled.
6.The appeal filed by the taxpayer succeeds.